Related

As admission officers review the college applications that have flooded in by the Jan. 1 deadline, it’s time for those student applicants (and their parents) to submit what may be the most vital piece of their financial aid plans: the Free Application for Federal Student Aid, or Fafsa.

Experts encourage families who are interested in receiving financial aid for college to complete the Fafsa, even if they doubt they will qualify. They also recommend submitting the form as soon as possible after Jan. 1; some states set Fafsa submission deadlines as early as February for state grants.

Another reason to apply early: Some states distribute financial aid on a first-come, first-serve basis, until the funds run out.

To help readers of The Choice navigate this part of the financial aid process, I’ve invited Mark Kantrowitz, the publisher of FinAid.org, to stop by the blog’s virtual Guidance Office to answer readers’ questions about the Fafsa.

To pose a question to Mr. Kantrowitz, please use the comment box below. He has agreed to accept questions through Jan. 16. His first answers are scheduled to appear on Monday.

Q on FAFSA: My daughter will start university this Fall, just as I am retiring (my wife does not work). My income will drop substantially as of mid 2013, and my family will be living from then on using a “nest egg” accumulated over the years (ie, money going out, little coming in). Although the nest egg is decent in size, it is not large enough to generate investment income sufficient to live on. We will be living on the capital rather than on the earnings from that capital.
I do not see anywhere on the FAFSA form to highlight our situation. Do schools consider such a situation as ours differently from a family with expectations of a steady income into the future? If so, how do I alert them to our situation?

Why if your 21 years of age do you need to submitted your parents income on the fafsa aplication? I do work and it seems I never receive anything through fafsa. The loans are barely enough to cover the cost of classes and no money for books. If I lived with a grandparent who is well within the poverty level could I possibly receive more assistance?

We are self-employed and annually pay over $20,000 for health insurance plus another $10,000 for dentist, 10% copays, glasses, etc, all of which is only marginally deductible. How does FAFSA treat these expenses – which of course are untaxed benefits for many people? We are looking primarily at large State schools and will ultimately have 3 children in college concurrently.

If a parent has lost her job or been cut back at work during the previous year, so income for the previous tax year does not reflect the family’s current income, does Fafsa have a way to disclose this? Will this be taken into account in determining the student’s need?

I’m confused about where (if) I should be listing two forms of savings.

My mom set up a state 529 account for me a long time ago and has been putting money into it for many years. The statement says she is the “participant” and I am the “beneficiary.” So is this account part of my savings or hers or do we not report it on the fafsa?

She also has two retirement plans, one that her employer puts money into (that is never part of her reported income) and one that she contributes to herself (that is reported as income but is deducted from taxes). She is not allowed to withdraw from the first, so it is “savings”? She can only withdraw from the second with a big penalty, so are those “savings”? I hope not, because she’s less than 10 years to retirement, so these are pretty large amounts that would probably make me ineligible for financial aid, but I can’t really use any of it for college.

Mark: my income for 2012 looks way higher than typical owing to fellowship income (that will end in August of this year). That will be some $20 K less from then onward. Second, my wife has moved from being actively employed to long-term disability at only 40% of her full income. Is there some way to explain this on the FAFSA? Are there other avenues in college planning where this radical shift in income should be noted?

The IRS now provides a process to auto-upload key data points from one’s income tax return and populate the FAFSA form using the extracted data. Has this been tried and tested? Have any issues resulted from using the auto-upload?

My mother is disabled and is unable to work. Her and I have been relying solely on her disablilty checks and my part time job. I’m unsure if there is anything specific that I need to do on the FAFSA application in order to verify that?

Also, I’m pretty sure I’ll be eligible for grants… would it be better to wait for the tax returns to be filed or to estimate how much income was made thoughout the year?

Our daughter is a freshman at college; she received around $6000 in grants from the university for the first year. Our usual adjusted gross income is low, but we recently received a sizable inheritance. We’re wondering if it might be best to put most of it in IRAs (we are both self employed) and/or in our younger child’s name; does that shield it from being considered for the older one’s college tuition – and if so, what should it go in- a 529 in the younger one’s name? Also, we were told the grants she got would “probably” renew each year if she maintained a certain GPA, but I wonder if that is also affected by FAFSA. Thanks.

We had to terminate a 401K from a former employer and take a distribution to replace my husbands truck so that he can continue to work(I’m a stay at home mom). They took out federal taxes, but I’m not sure where this will be reported on our taxes as well as the FAFSA. Will this affect my child’s qualification and/or is there any way to explain this one-time circumstance?

15 years ago, my mother set up a QPRT, thinking that she was doing her four children a great service (as did we all at the time…). The QPRT terminated in 2012 and is now in a successor trust. Luckily, my mother is a vital 80-year-old who is able to live independently in what we obviously still consider her home. Am I correct in assuming that, despite the fact that this isn’t really a second home for any of us, each of the affected families now has to claim 1/4 of the home’s worth as an asset or second home on the FAFSA filings for our children? Are there any grounds for asking for a review?

The true irony here is that, due to the economy and a depressed real estate market in her area, the home is worth no more today that it was when the qualified personal real estate trust was established.

My step-daughter is a dependent claimed on our taxes. She has received the first installment in a wrongful-death settlement that was set up for her by her mother after her father died. This money is paid out by an insurance company that settled the wrongful death suit. Does this money qualify as an asset and have to be claimed on the FAFSA form?

My son will be starting college next Fall, and over the course of the next 3 years we have a huge debt to pay off from sign-on income at a prior employer, $100K each year for the next 3 yrs. This more than wipes out our savings, and most likely will require us to dip into IRAs as well. There was no place to note this on the FAFSA, but we were able to note it on the CSS profile . When shall we contact the financial aid offices at each school he is considering regarding this? Thank you for any insight!

My son splits time between households; his mother is the primary custodian. Both parents are married and there is one additional child in each household. Our incomes as a share of the whole are roughly:

I have one daughter who was married Dec 18, 2012 and another who is getting married this weekend 1/13/2013. Both are enrolled as FT college students. With them being married, do I file their 2013-2014 FAFSA’s with my 2012 tax information, and then they use their tax info for the following years?

We are a same-sex couple in a civil union. The FAFSA does not have a category for same-sex un-married couples. Should we designate one of us the “mother” and the other the “father” and fill out the form that way, or only use one parent on the FAFSA?

I am the mom of a high school junior who is embroiled in divorce proceedings that might extend beyond the college application season. I currently earn only a bit more than my son’s father, and although I have some funds put away in two 529 accounts, I will need to apply for financial aid through FAFSA, etc. My son’s father is refusing to pay for college or complete any financial aid forms. What sorts of preparations do you suggest I make so that my son can be considered for financial aid? I am currently the residential custodial parent but custody itself (where decision making is concerned) is deemed joint. (I live in NY.) Thank you.

Next year we will have two children in college, but they will only overlap for one year. We have been very comfortable financially, so have never applied for financial aid. We just found out on Monday that there is a very good chance my husband will be downsized out of a job in a few weeks, with no future prospects currently in sight. Even though we would not have qualified for financial aid (based on last year’s income, bonus and savings), would it make sense to apply if he loses his job? How would having no income impact our possible awards, even if we had savings? If he got a job later (three months, six months) after money was awarded, do they take back the money?

My son will be starting college this fall. My husband and I are both disabled. He receives SS disability. Our son gets a benefit amount until he’s 18, which is this April. I had a disability policy that I paid the premium on, not my employer. Are all 3 of these payments reported on FAFSA?

My husband also took a withdrawal from his retirement (a mutual fund rolled over from an employer). This was used for remodeling and a new AC unit. Should this be reported?

My husband also receives a small monthly pension. Report on FAFSA?

We have some stock that my mother bought for my son. My husband is the custodian. It reads “John Doe Cust Henry Doe UGMA SC (we live in South Carolina). Is this reported?

We have a 529A plan for our son. Is this reported?

Finally, my husband and I have a mutual fund in our names. Is this reported?

My niece is 19 years old, single, no kids, worked only 1 month (she made less than 1K in all 2012).

I paid for all her college expenses, rent, food, medical bills, etc… in all 2012 due to her mom losing her job over two years ago and still unemployed (and she has no dad, so I was her only financial provider in 2012).

So, question is, if I added my niece as my dependent in my 1040-EZ form for taxes, will it negatively affect how much she gets from 2013/2014 FAFSA given that I made 60K in 2012 as single and head of household?

Or, should she file her own 1040-EZ for taxes? And so do not add her as my dependent?